The government’s monthly trade figures come with a health warning – and rightly so. A combination of Covid-19 and Brexit means it is impossible to draw any firm conclusions about the trend from a single month’s data.
Look at what has happened to the UK’s exports to the EU. These collapsed by a revised record 42% in January but according to the latest figures from the Office for National Statistics subsequently rose by more than 46% in February.
Some bounceback in February was always to be expected. Towards the end of 2020 there was a lot of stockpiling going on as firms anticipated disruption as a result of the new UK-EU trading arrangement. That was a wise precaution because it is clearly taking time for businesses – on both sides of the Channel – to adjust. That process was not helped by the lockdown measures imposed across the UK in response to a fresh wave of the pandemic.
As it happens, UK exports to the EU have recovered more quickly than imports from the EU, which rose by just over 7% in February after a drop of 30% in January. Again, this is nothing to get too excited about: stockpiling could simply have been more extensive in the UK than in the EU. The ONS points out that while the new arrangements came into force immediately for UK exports they were originally planned to take effect for imports from 1 April. Firms exporting goods to Britain might have been waiting for the new systems to settle in before continuing with their trading.
The upshot is that exports to the EU in February were 7% lower than the average monthly total in the second half of 2020. That’s still a chunky fall, reflecting the difficulties some exporters – especially small businesses – are still facing with increased bureaucracy.
Yet one big feature of the past year has been the ability of companies to cope with challenging circumstances.
Over time, firms have found ways to make money despite lockdowns, which is why the latest GDP figures show national output – which dropped by almost a fifth when restrictions were first imposed last spring – on course to decline by about 1% in the first quarter of 2021. The next few months will show whether exports to the EU are following a similar pattern.